Over two years after acquiring digital payments arm PhonePe, Flipkart’s Board has accorded an approval to hive off PhonePe as an independent entity. While the overall fintech startup segment is receiving a lot of attention including from investors, the digital wallets/payments space too is seeing a lot of activity.
According to a report in the Economic Times, PhonePe could seek funds to the extent of $1 billion to strengthen the payments company’s finances. The one issue to be clarified is, how much of the equity Walmart will liquidate in this fund-raising round for PhonePe. A fresh team of board members are likely to be appointed to manage this entity. The report says the other investors in Flipkart who have stayed invested (remember Walmart holds only 77% of the equity), have supported this strategy. They include Tencent and Binny Bansal. There is even speculation that Walmart would want to take the PhonePe initiative to the US market.
PhonePe was founded in 2015 by ex-Flipkart executives Sameer Nigam, Rahul Chari and Burzin Engineer and was acquired by Flipkart in 2016. Observers find it interesting that while Walmart decided to change the independent status of Myntra and Jabong, also acquisitions under the previous management, in the case of PhonePe an exactly opposite strategy is being adopted.
What will be watched with renewed interest is how the competition in the sector plays out. Paytm and Google Pay are the other players in this business. PhonePe could intensify its efforts at wooing the prospective customers. Paytm, as is known, is backed by SoftBank of Japan and Google can never be said to be short on funds. And Amazon has its own plans to directly and indirectly expand its presence in the fintech play.